1. Issues in Social and Environmental Accounting
Vol. 3, No. 1 June 2009
Pp. 88-94
Research Note
An Urgent Need for Ethics Education for
Accountants
Desti Kannaiah
Middlesex University, Dubai
N.S.Kumar
SRM University
Chennai, India
Abstract
Social, political and technological changes have challenged traditional idea of professional
practice by accountants. Accounting is both an essential practice and a vital profession in the
economically developed world of today (Ronald F.Duska and Brenda Shay Duska,2003). To-
day, professional accountants cannot exist by technical knowledge alone; they have to posses
and apply that within a framework of professional values, ethics and attitudes.(Peter Williams,
2007). Ethics, values and principles serve as benchmarks of the accounting profession. They
determine what is right and wrong, appropriate and inappropriate, on a universal basis every
time. (Joe Lienandt, 2003). Enron’s bankruptcy case, in which their auditors and consultants
from the accounting firm Arthur Anderson, came under criticism for not apparently carrying
out their responsibilities as accountants. The Enron/Arthur Anderson’s case has raised the ethi-
cal question, ‘what is the appropriate behaviour for accountants?’ and ‘what are the accountants
supposed to do?’ This paper attempts to address the following issues: How to teach ethics to
those entering the profession; How to ensure that the ethical standards and behaviour of experi-
enced accountants are as fresh and relevant as technical knowledge.
Keywords: Professional bodies, professional ethics, accounting education, code of ethics, ethi-
cal behaviour
Introduction same time, accounting has an ethical
dimension. In carrying out their respon-
The purpose of accounting is to provide sibilities as professionals, accountants
information on economic affairs. Ac- should exercise sensitive professional
counting is a skill demanding expertise and moral judgment in all the activities.
and since accountants have clients who (American Institute of Certified Public
depend on that expertise, accounting is Accountants –Code of Ethics). Ac-
included among professions. At the countants have a duty to provide infor-
Dr. Desti Kannaiah is a Senior Lecturer at the Middlesex University, Dubai. N.S.Kumar is a Research Scholar with
SRM University and an Executive Consultant with Creatif Mindz.

2. D. Kannaiah, N.S. Kumar / Issues in Social and Environmental Accounting 1 (2009) 88-94 89
mation to stakeholders that is under- Literature Review
standable, timely and relevant, and they
bear the responsibility of ensuring that In 2002, the accounting profession was
these purposes are met. under attack with the fall of Enron/
Arthur Anderson and WorldCom. Ac-
Ethics countancy profession thus faced a credi-
bility crisis. (Earley and Kelly, 2004;
Institute for Global Ethics defines ethics Zabibullah, 2004). Accountants, in per-
as “Ethics in its broader sense deals with forming their functions, face not only
human conduct in relation to what is legal rules of behaviour but also moral
morally good and bad, right or wrong. It elements created by specific circum-
is the application of values to decision stances. It is a never ending challenge to
making. These values include honesty, make sure that a mix of honesty, objec-
fairness, responsibility, respect and com- tivity, integrity and judgment are in
passion”. (Kidder) equilibrium. As a result, there has been
a proliferation of code of ethics or of
Ethics and Accounting professional conduct. The drafting of
such a code provides an opportunity for
An article in the Wall Street Journal accounting professionals to examine the
quoted a young entrepreneur in Russia nature and goals of their work, and offer
as saying that he was getting ahead in information to others about what can be
business by breaking laws. He stated, expected from them. (Catherine Gow-
“Older people have an ethics problem thorpe and John Blake, 1998).
By that I mean they have ethics.” Con-
versely, Roger Smith, former chairman “Ethics’ in all forms is concerned with
of General Motors said, “Ethical practice right or wrong, good or bad. Brook
is , quite simply, good business.” First (1989) noted that accountants are always
and foremost, practicing good ethics is faced with a dilemma – to satisfy the
the right thing to do. Second, unethical need of their clients or risk losing them.
behavior always comes back to haunt Higgs and Kepelianis (1999) also
you. Most large companies have a code pointed out that the need to satisfy mul-
of ethics designed to encourage ethical tiple interest groups do create ethical
and responsible behavior by employees. conflicts among accountants. A num-
However, general guidelines may not be ber of studies suggest that cultural fac-
specific enough to identify misbehavior, tors have an effect on the ethical beliefs
and list of dos and don’ts can lead to the and attitudes of accountants.
false view that anything is okay if it’s
not specifically forbidden. Most busi-
nesses are intolerant of unethical con- Research Methodology
duct by employees. Codes of conduct
are not enough. Senior management This paper is purely based on secon-
must set a high ethical tone that is dary research- local news papers, profes-
steadily reinforced by management sional journals, magazines and govern-
words and actions. ment sources.

3. 90 D. Kannaiah, N.S. Kumar / Issues in Social and Environmental Accounting 1 (2009) 88-94
This paper attempts to address the fol- ity and law. (Christopher J, Cowton,
lowing issues: 2007). Chua and Mathews (1995) noted
How to teach ethics to those entering that public confidence in the work of
the profession (new accountants) accountants will enhance the trust of
How to ensure that the ethical stan- accountants. “ Mere rule following will
dards and behaviour of experienced not make accountants get respected’.
accountants are as fresh and relevant (Turpen and Whitner, 1997). People
as technical knowledge.(Integrity) value accountants for their skills, knowl-
edge, independence, objectivity and in-
tegrity. ( Mohammad Adam Bakar).
Discussion & Findings
Ethical dilemmas faced by account-
The Professional Accountant and the ants
Code of Ethics
It should be recognized that rules cannot
Today, professional accountants act as cover all eventualities and ambiguities
business advisors, financial analysts, will remain. (Page and Spira,2005).
communicators, negotiators and manag- When deviant behaviour is exhibited by
ers. top management, and accountants within
the organization are in a position to
A qualified accountant is able to use cer- identify them, then it must be in the pub-
tain designatory letters and that provides lic interest for accountants to ‘blow the
valuable signals, in the market place whistle’. (Susan Richardson and Bill
about the standard of behaviour that can Richardson, 1998). In practice, how
be expected from the individual mem- many accountants will be able to do
ber. (Christopher J.Cowton, 2007). this?
The accounting profession is self-
regulated through various professional The tax practitioner, acting as an agent
bodies rather than being regulated by the of a client, has a professional ethical
government. Violations of ethical stan- duty to that client to minimize the cli-
dards can lead to a person being publicly ent’s tax liability by legal means. Pres-
expelled from the professional organiza- sure to exploit the law and find loop-
tion. The professional accounting bod- holes come from the client, and fear of
ies have taken adequate steps to combat losing the client will intensify the per-
unethical behaviour among accountants. sonal moral dilemma of the tax practitio-
They want to make sure that public con- ner. Hansen et. al. says that ‘tax profes-
fidence on the profession remains high. sionals should be more concerned with
Code of ethics by accounting profes- what is right than with technical compli-
sional bodies have become a self-control ance with the law. Ethical standards and
or self-governing mechanism of the ac- conduct should be above the self-serving
counting profession. Professional ac- action taken by those with a vested inter-
counting bodies have introduced codes est in the outcome of a particular event .
of conduct for their members. These are (1992:685-6).
independent of contract or state law, and
these are self-enforced. These codes Tax evasion involves deliberate falsifi-
demand more than conventional moral- cation of information and deceit,

4. D. Kannaiah, N.S. Kumar / Issues in Social and Environmental Accounting 1 (2009) 88-94 91
whereas tax avoidance involves arrang- Ethics education is a journey of sensiti-
ing events and transactions, in a certain zation and development. In this jour-
time scale to secure a tax advantage. ney, a person becomes more aware of
The ethical conflicts faced by tax practi- the ethical dimensions of a matter, de-
tioners can be grouped into four areas: velops the capability to reflect on norms
and values in order to differentiate rights
the grey area governing tax avoid- and wrongs, and learns the means to
ance and tax evasion reach a decision and the methodology
the discovery of error made by tax for actioning such critical decisions.
authorities which results in a under- (Steven Dellaportas, Berry J.Cooper,
collection of tax or an over- Philomena Leung, Beverley Jacking,
repayment of tax 2005). Ethics education should not only
The discovery of an irregularity per- be taught, it should be reinforced by
petrated by client business organizations, senior profes-
Extent, manner and time of disclo- sionals and professional bodies.
sure. (Catherine Pilkington, 1998)
AICPA has clearly issued the stan- Ethics education can provide insights
dards for tax services and expects it into how to adjudicate between conflict-
members to follow these standards. ing principles and show why certain
courses of action are more desirable than
“Irregular auditing practices “are not others. Ethics education, as defined by
uncommon in the profession. Pressure Langenderfer and Rockness, is more
upon auditors to meet time budgets ap- than studying the code of professional
pear to have grown, because of reduced conduct, but rather a process whereby
audit fee resulting from keen competi- individuals become more consciously
tion in audit market. Those auditors involved in making ethical decisions.
who manage to complete their work by Unfortunately, in the past, ethical as-
whatever means, within the budget allo- pects of accounting have been accorded
cation of time are much more likely to relatively little attention in accounting
receive favourable personal perform- courses run by universities.
ance evaluations.
The goal of teaching ethics is to help
Ethics Education for Accounting Pro- students acquire skills to deal effectively
fessionals with ethical challenges and to create a
supportive ethical environment for their
For many accountants – either profes- subordinates.
sional or not – after university and quali-
fication in many countries, on-the-job (Konrad,1978; Hansen,1987; McDonald
training has been only ethics education and Donleavy,1995). Ethical education
that they been likely to get. (Hunt, should centre on thinking about ethical
2000). issues and how the students as individu-
als will face the issues before they are
Enriching ethics in accounting education confronted with real world dilemmas.
and improving the moral behaviour of its Business schools seem to be inadver-
members is one way to restore the credi- tently overemphasizing technical train-
bility of the profession. (Mchail,2001). ing for accountants and ignoring ethical

5. 92 D. Kannaiah, N.S. Kumar / Issues in Social and Environmental Accounting 1 (2009) 88-94
considerations. Educators teaching ethics will be
increasingly be looked upon as role
Objectives of Ethics Education models by students
The common objectives of Ethics educa- Research has shown that students can
tion are: improve their ethical reasoning ability
Relate accounting education to moral through exposure and practice. (Rest,
issues in business context 1986). The ethical curriculum helps stu-
Recognise accounting decisions that dents develop a moral point of view.
have ethical implications
Develop a sense of moral obligation
and social responsibility Summary and Conclusion
Develop the abilities needed to deal
with ethical conflicts or dilemmas What can be done in the future?
Learn to deal with the uncertainties
of the accounting profession Empirical evidence suggests that ethics
education is now integrated into ac-
(Adaptation of Loeb’s (1988) goals counting curricula mainly in auditing
for accounting education) courses. Entry level accountants will
only make morally dependable decisions
Ethics education helps accountants iden- if the business environment and univer-
tify the basic ethics principles that can sities support ethics education. Stu-
be applied to action. Ethical reflection dents should be first taught general busi-
can make accountants more knowledge- ness ethics. Accounting ethics topics
able and conscientious in moral matters. must be integrated into each and every
accounting module through out the pro-
The authors concur with the findings of gramme. Universities must develop a
Owen (1983). Cohen and Pant, 1989 and capstone course that deals with complex
Bok (1976) about the problems facing issues of business social responsibility
ethics education. The authors have and professional responsibility for senior
added their views to these findings: professionals. Accounting firms need
to evaluate periodically the design and
Lack of sufficient training for busi- operating effectiveness of the organisa-
ness and accounting teaching staff to tion’s compliance and ethics pro-
properly teach ethics as a subject grammes and to assess their overall ef-
Teachers feeling uncomfortable fectiveness.
teaching ethics in the class room
Teachers reluctant to display their Teachers teaching ethics courses must
personal values in the class room. undergo training in ethics education.
Reluctance of universities to treat ‘ They must be trained to use a combina-
accounting ethics’ as a separate sub- tion of teaching methods that make
ject in their curriculum teaching of the subject interesting and
Few ethics case studies in account- effective. Interactive learning, group
ing and finance learning, real life case studies, role-
Accounting text books are too phi- plays, reviewing of literature and films
losophical in their approach to ethics are the ways through which students

6. D. Kannaiah, N.S. Kumar / Issues in Social and Environmental Accounting 1 (2009) 88-94 93
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